The Smartgroup Corporation Ltd (ASX: SIQ) share price has rocketed 7.6% higher in early trade this morning after the company released its latest earnings guidance.
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Why is the Smartgroup share price on the move?
Smartgroup has provided an update on its earnings expectations for the full year ending 31 December 2020. The Aussie salary packaging and novated leasing company is reporting a strong second half of the year.
The Smartgroup share price rocketed more than 7% at the open following the update. Smartgroup shares are up 19.8% to $6.30 since 3 November, despite falling 6.9% in 2020.
In today's release, Smartgroup advised it is expecting an adjusted net profit after tax of $65 million for the full calendar year. An improved operating earnings before interest, tax, depreciation and amortisation (EBITDA) margin has also benefitted Smartgroup's earnings. The company is expecting an operating EBITDA margin of 44% for the second half, which is up just slightly from 43% in the first half of the year.
The company's forecast operating EBITDA of $47 million for the second half is attributed to improved cost controls offsetting decreased novated leasing volumes from the first half.
Smartgroup is also forecasting a number of salary packages and novated leases under management in line with the first half of 2020.
Smartgroup Managing Director and CEO, Tim Looi, said Smartgroup remains "cautious", but highlighted the company's "encouraging" full year profit result and a "positive trend" in novated lease enquiries.
However, Mr Looi said the current environment is fragile, with potential further economic disruption. The coronavirus pandemic and public health responses continue to challenge consumer confidence and the Smartgroup business.
Foolish takeaway
The Smartgroup share price has been up and down throughout the year. At the time of writing, shares in the salary packaging group are trading at a price to earnings (P/E) ratio of 16.9 with an $836.8 million market capitalisation.
